We are

an experienced and technical team, managing research driven investments in small cap resource companies.

Quite simply,
we do our homework

  • Wholesale unit trust (sophisticated investors only)
  • Predominantly long positions in developing resource companies with capacity to use bought short positions for downside protection
  • Ungeared
  • Primarily domestic listed equities focus with ability to take unlisted and foreign listed positions
  • Flexible commodity and investment mandate - ability to invest across diverse range of commodities
  • Fully independent fund - no broking house or corporate advisory affiliation
  • Based in West Perth, Western Australia - access to one of the largest pools of resource companies globally
  • $250,000 initial investment (in the normal course of business)
  • Designed to compliment a diversified investment portfolio - offering exposure to a high risk, high potential return space

we have track record, technical and market experience.

When we invest, we back people.

Nero's management has;

  • A proven track record
  • Significant technical and market expertise
  • A broad network of relationships within the industry
Russel Delroy
Russell Delroy
  • Managing Director and Investment Manager Nero Resource Fund
  • Former Investment Manager at diversified private company
  • Realised pre-tax profit of +$37m over 5 year period to June 30 2011 from opening equity position of less than $10m (June 30, 2006) (private company portfolio)
  • Director, Investment Consultant, Marford Group
  • Deputy Chairman Student Edge
  • Entire professional career within broking and investment industry (Patersons Securities, Morgan Stanley UK, Marford Group)
  • BComm
Professor Steffen Hagemann
Prof. Steffen Hagemann
  • Director Nero Resource Fund
  • Professor Economic Geology at University of Western Australia
  • Runs geological due diligence for Nero - local geology, regional geological setting, assessment of strategic approach to exploration
  • 23 years of geological experience
  • Currently Deputy Director at the Centre for Exploration Targeting (UWA) conducting projects in Au, Fe, Ni, Cu, Zn within Australia, South America, North America, Asia and Africa
  • BSc (Frankfurt), MSc (Wis-Madison), PhD (Wst. Aust), Dr rer. nat. Habil (Tech Univ, Munich)

Utilising broking and corporate relationships and critically running independent due diligence.

1. Network/
Relationships

  • Broking Houses
  • Corporates
  • Broad network of broker relationships
  • Broad network of corporate relationships
  • Access to high quality deal flow
  • Ability to access significant allocations

2. Deal Flow

  • Idea generation
  • First filter
  • Analyst models
  • Constant stream of deal flow and idea generation
  • Utilise broker / analyst relationships for first filter of companies
  • Review analyst models for initial assessment and peer comparison

3. Assessment

  • Macro / commodity view
  • Company / site meetings
  • Detailed evaluation
  • Acquisition
  • Macro view and commodity preference regularly assessed
  • Targeting ‘sweet spot’ on value curve between first discovery and production
  • Bottom up assessment of board, management, asset quality, exploration strategy, risks
  • Conservative approach to assessment followed by aggressive approach to acquisition

Investment Objectives

Our primary objective is simply to outperform on an absolute basis.

  • The performance fee structure ensures we are fully aligned with investors and strongly motivated to deliver performance on a consistent, long-term basis
  • We take into account the three key pillars of sustainability (social, environmental and economic) when making investment decisions

Asset allocations

Absolute return delivery requires variable asset allocation.

  • Cash weighting can vary from
    0-100% with our preference to maintain higher cash levels during boom market conditions and lower cash levels in depressed markets (a contrarian bias)
  • The fund will invest in listed and unlisted opportunities within the broader resources space both domestically and internationally with a strong bias towards listed, Australian companies with offshore assets
  • Our investments are strongly weighted towards medium and long term investment timeframes - an investment in the fund should hold the same timeframe objectives
View Graph

Finding development opportunities

Value curve

  • Targeted focus on value uplift periods within typical explorer/developer value curve
  • Detailed fundamental assessment of company ahead of investment decision
  • Underlying commodity pricing relevant but not main driver of value generation

Pricing

  • Small caps often mispriced; economic theory of perfect knowledge and market equilibrium difficult to apply to this asset class due to factors such a liquidity and ability to disseminate information (ie. to be heard above the pack)
  • Fundamental assesment of assets and management to identify companies that may have been ‘missing’ by the market and represent value

Replacement

  • Small cap resource companies focus on developing new assets whereas large cap resource stocks often trade as a function of commodity pricing
  • We are not attempting to play the commodity price cycle - we are targeting the future development projects through a ‘bottom up’ investment approach
  • Majors moving away from exploration expenditure - production growth through expansion or acquisition
Investment Value Uplift Periods
View Graph

Why we like this space in the long term

‘Easy’ resources are being rapidly consumed:

  • ‘The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly’

    (Jeremy Grantham - renowned expert on asset bubbles, April 2011, GMO Quarterly Letter. Investment Management firm with US$97b under management.)

Chinese demand is strong and sustainable:

  • ‘In the next five years, Chinese demand is likley to remain a supportive factor in global commodity markets, not least because the government’s five year plan makes provision for investments in railways, utilities and social housing... China has barely begun to omplement the policies required to support (the) shift towards private consumption, and ongoing urbanisation ensures that investment demand remains strong.’

    (The Economist Intelligence Unit, January 26, 2012)

Global population growth will continue to pressure the world’s natural resources.

World Population Continues To Grow 1500-2050

Finding development opportunities

The advantages

Independent team

  • Utilising independent team with specific expertise conducting due diligence on investments.

Focused and Agile

  • Ability to move swiftly on opportunities
  • Flexibility through broad mandate within a dedicated investment focus
  • Targeted to an investment space that often represents a small portion of a balanced portfolio and is therefore not as intensively managed

Aligned

  • Incentivised to deliver returns and therefore fully aligned with client (as opposed to transaction based models such as brokerage)
  • Absolute return (not an index tracker)

Pooling of capital

  • Scale of fund enhances access to the right details

Simple and aligned.

  • Management fee of 1.75% per annum (charged quarterly)
  • Performance fee of 20% of performance over hurdle rate
  • Performance hurdle rate of 90 day Bank Bill rate +3% (Annual)
  • Eternal high watermark

All administration fees, audit tax and legal fees for fund establishment covered by the trustee

Brokerage fees and charges (including GST) incorporated as cost of asset acquisition/disposal

This document has been prepared by Nero Resource Fund Pty Ltd
(ABN 92 143 456 017) (Nero).

No party other than Nero has authorised or caused the issue of this document, or takes responsibility for, or makes any statements, representations or undertakings in this document.

Presentation of general background: This document contains general background information only about Nero’s activities as at the date of this document, 06 March 2012. It is information in a summary form only and does not contain all the information necessary to fully evaluate any transaction or investment. It should be read in conjunction with Nero’s Investor Memorandum and Trust Deed.

Nero makes no representation or warranty (express or implied) as to the accuracy, reliability or completeness of this document. Nero and its directors, officers, employees, agents and associates will have no liability for any statements, opinions, information or matters (express or implied) arising out of, or contained in or derived from, or for any omissions from this document, except liability under statute that cannot be excluded.

Not investment advice: The information provided in this document is not intended to be relied upon as advice to investors or potential investors and has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs.

Any investment decision should be made based solely upon appropriate due diligence. Recipients of this document are advised to consult their own professional advisers. An investment in any unit trust, including Nero, is subject to significant risks of loss of income and capital.

Financial data: Except as stated otherwise,
all dollar values are in Australian dollars (A$).

Risks: An investment in New Units is subject to investment and other known and unknown risks, some of which are beyond the control of Nero and Nero’s directors, employees, servants, advisers or agents. Nero does not guarantee any particular rate of return or the performance of the fund nor does it guarantee the repayment of capital from Nero or any particular tax treatment.

Please refer to the Investor Memorandum and Trust Deed for further information. This product is not available to United States investors. Investment in this product should not represent a material portion of your net wealth.

Nero Resource Fund is an Authorised Representative of Treasury Services Group under AFSL No. 315347 to issue units in the fund to wholesale investors.

Get in Touch

+61 8 6555 3290
rjd@nerofund.com.au

Sterling Cooper Collective
Ground level, Suite 2
1251 Hay Street, WA 2005

PO Box 6220
Swanbourne WA 6010